Public Goods, Private Information: Providing an Interesting Internet

By J. Howard Beales III 

Internet content is a public good: It is not used up in consumption. Private market provision of such public goods has generally depended on revenue from advertising, as does internet content today. The value of advertising, however, depends critically on the availability of information about the likely viewer. When information is available, advertising prices are roughly three times higher than when there is no information about the viewer. Impairing the flow of information would significantly reduce the revenues available to support internet content, an impact that would be particularly problematic for smaller publishers. Finally, advertising is actually beneficial to consumers. It leads to more competitive markets, with lower prices and more product improvements, and it narrows the gaps between different demographic groups.

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